Labour wins wager, India, Inc. the war

Tushar K Mahanti / ETIG, TNNAug 25, 2003, 07.43am IST

It's springtime for the country's industrial labour. When workers the world over are spending sleepless nights for fear of a wage cut, workers in domestic industries have received a sharp hike in wage earnings following an industrial recovery.

But not without reason. Much of the credit of the turnaround this time goes to workers, who have recorded a sharp rise in productivity in '02-03. An ET survey of 100 companies finds the average productivity of labour, measured as per worker value of output, has increased by 21% in '02-03 from Rs 38.20 lakh in '01-02 to Rs 46.23 lakh. Their average annual wage earnings have increased by 13.2% from Rs 2.71 lakh to Rs 3.07 lakh during the same period.

The sharper rise labour productivity has helped India Inc to cut unit costs and subsequently, the pressure on margins. In fact, for every additional rupee spent on wages in '02-03 over '01-02, an additional Rs 22.6 worth of additional output was produced during the same period. That is, per unit cost of labour has fallen despite a rise in the average wage bill of workers.

Significantly, the movement of labour productivity this time round seems to be directly linked to the movement of wage earnings. As many as 77 of the sample companies witnessed a rise in labour productivity in '02-03 over '01-02 following an increase in average wage earnings. Only eight of them recorded a fall in productivity despite an increase in annual wage earnings.

But then, 12 others have witnessed an increase in labour productivity, despite a fall in wages.

Clearly, India Inc's new labour policy is bearing fruit. In a bid to increase labour productivity, companies have been reducing workforce as well as changing its profile in recent years.

Technical and better qualified hands have progressively replaced the unskilled workforce, often at higher wages. This is has worked. The average wage bill has increased, but has been compensated many times more by an increase in labour productivity.